Only Small Fry Snared So Far in Whitewater

At the outset of the Whitewater investigation in January, 1994, the primary targets of the probe were presumed to be President Clinton and his wife, Hillary.

But now that the investigation has been in full swing for more than a year, the earliest suspects are proving to be an unlikely collection of little-known Arkansans whose crimes might never have come to light had it not been for their proximity to the Clintons.

So far, the biggest fish that independent counsel Kenneth W. Starr has caught in his massive investigative net is Webster L. Hubbell, the former third-ranking official at the Justice Department, whose crimes had nothing to do with the Clintons’ controversial Ozarks resort development known as Whitewater Estates.

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In addition to Hubbell, Starr has nabbed the likes of David Hale, a former municipal judge who has admitted to defrauding the government; Neal T. Ainley, a former banker who now runs two local convenience stores; Chris V. Wade, a bankrupt ex-real estate broker, and Robert W. Palmer, an unemployed accountant.

To say that these four defendants are political nobodies is an understatement. “I’m just a little, bitty thing,” said Palmer, who is awaiting sentencing for conspiring to mislead government bank examiners. “I’m not even big enough to be called a pawn in this game.”

Thus, even those defendants who have admitted crimes can’t help feeling that they have been swept up into a political whirlwind that has little to do with them.

“I know how Grenada felt,” joked Wade, who has spent $30,000 on legal fees and lost his real estate license as a result of the Whitewater probe.

Certainly, Starr may have something significant to learn from those defendants who have agreed to cooperate with him as part of a plea bargain. Suzanne Garment, author of “Scandal: The Culture of Mistrust in American Politics,” notes that even though the Whitewater probe does not appear to be closing in on the Clintons, Starr could be methodically building a case against them.

At present, however, the Clintons are being told by their lawyers that Starr has not found evidence linking them to an alleged criminal conspiracy in connection with the Whitewater project. In fact, Clinton’s advisers now feel that the likeliest consequence of Starr’s final report for the First Family would be highly uncomfortable political embarrassment.

As some Clinton aides see it, the most damaging part of the story that has yet to come to light involves events inside the White House immediately after the suicide of White House counsel Vincent Foster on July 20, 1993. Foster’s Whitewater files were removed from his office before it could be searched by authorities investigating his death.

The meager developments in the case so far come as particularly good news for Hillary Rodham Clinton, who was more deeply involved in the family’s day-to-day financial affairs in the 1980s than was her husband and who cannot claim the legal immunity from criminal prosecution that her husband could invoke as President.

As things now stand, the highest-ranking government officials who have emerged as leading targets as a result of Starr’s exhaustive probe are Arkansas Gov. Jim Guy Tucker and White House aide Bruce R. Lindsey, both of whom have denied any illegal acts.

Even Lindsey and Tucker are not certain to be charged by Starr. Despite news leaks that Starr was preparing to indict Tucker late last year along with James B. McDougal, Clinton’s partner in the Whitewater project, no legal action has been taken against them.

Tucker’s lawyer, John Haley, acknowledges that the governor still could be charged with a crime, even though he insists Tucker has done nothing wrong. But Lindsey’s attorney, Allen Snyder, seems confident that Starr will not indict his client.

“I can tell you that Mr. Lindsey has been cooperating with the independent counsel inquiry,” Snyder said. “He has done nothing wrong.”

From the beginning, the Whitewater scandal has posed a difficult task for the independent counsel because it is a complex, ill-defined case involving many unrelated elements and a broad range of players, both in Arkansas and Washington. Although Republicans have hammered away at the allegations, polls show many Americans still do not grasp the real nature of the accusations against Clinton.

At the heart of the scandal are allegations that Whitewater Estates--a 230-acre community developed jointly, beginning in 1978, by the Clintons, McDougal and his ex-wife, Susan--was used as a conduit to illegally funnel funds from McDougal’s Madison Guaranty Savings & Loan into the Clintons’ private and political endeavors. At the very least, there is evidence that money from Madison Guaranty found its way into Clinton’s gubernatorial campaign treasury.

Although Starr has received valuable information about these transactions from some grand jury witnesses, he has been unsuccessful to date in gaining the cooperation of the one person who knows the most about the Whitewater dealings: McDougal.

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As a result of his unwillingness to cooperate with Starr, McDougal, an unemployed eccentric who now lives a quiet life in his hometown of Arkadelphia, Ark., has been warned that he could be a prime target for charges in the case.

In fact, if Starr hopes to indict McDougal on evidence related to a 1985 fund-raiser that he hosted at Madison Guaranty to help Clinton retire his 1984 campaign debt, he must do so before the 10-year statute of limitations runs out on Tuesday. Investigators are probing whether three cashiers’ checks received by Clinton’s campaign that night may have been written illegally on Madison accounts.

Susan McDougal has offered to cooperate with Starr only if she is granted immunity from prosecution, according to her lawyer, Bobby McDaniel of Jonesboro, Ark. Starr has refused to give her immunity.

Wade, who resides in the Ozarks village of Flippin, Ark., and served as real estate agent for the Whitewater project, is promising to tell Starr everything he knows about the finances of the resort development. But he says he knows nothing that would directly implicate the Clintons in a crime.

Likewise, Palmer, who has been cooperating with Starr since he pleaded guilty to helping doctor the records of Madison Guaranty before the arrival of government auditors in the late 1980s, says he never heard of Whitewater until he read about it in a newspaper.

Hale, who was already being prosecuted by the government when the Whitewater scandal came along, initially added to the furor by alleging publicly that Clinton had personally urged him to defraud the government by lending $300,000 to Susan McDougal from his federally insured small-business investment corporation. About $110,000 of that money wound up in the Whitewater bank account.

Although these allegations still are being aggressively explored by Starr’s staff of more than 30 lawyers and investigators, sources say the independent counsel has not yet come up with a trustworthy witness to corroborate Hale’s story.

Hale, meanwhile, is being kept in protective custody.

Tucker, who succeeded Clinton as governor, is known to be under scrutiny for loans he received from Madison Guaranty and Hale, some of which were not repaid.

Haley, Tucker’s lawyer, insists that the transactions were just bad investments and that no ordinary prosecutor would bring charges on the evidence Starr has against Tucker. But Haley said he does not rule out an indictment against his client. In fact, Haley, who was involved in a cable television venture with Tucker, acknowledged in an interview that it was not beyond the realm of possibility that he himself would be charged by Starr.

Both publicly and privately, Tucker has alerted Starr that he will vehemently fight any charges against him. Some observers believe that his stance has made the independent counsel’s office more cautious in building its case against him. As a result, plans to move against Tucker last December were delayed, sources said.

When Starr recently charged Ainley with fraud in connection with the handling of 1990 Clinton campaign funds by the Perry County Bank in Perryville, Ark., where Ainley was then president, it became clear that the independent counsel was pursuing a case against Lindsey.

Lindsey, a longtime confidant of the President who now serves as deputy White House counsel, is the focus of Starr’s investigation into the funding of Clinton’s 1990 gubernatorial campaign because he served as campaign chairman.

Ainley is accused of failing to report withdrawals by the campaign in excess of $10,000 to the Internal Revenue Service, as required by law. Ainley is expected to testify at his trial that he acted on the instructions of the bank’s owners, who were big backers of Clinton. But some close to the case are skeptical that Starr will be able to prove that the bank concealed the transactions at Lindsey’s request.

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The most volatile Whitewater-related allegations against Clinton--those involving actions by his subordinates since he became President in January, 1993--have been virtually laid to rest.

Starr’s predecessor as independent counsel, Robert B. Fiske Jr., concluded that Foster’s death was a suicide stemming from depression, rather than foul play related to the Whitewater matter, and Starr is known to agree. Fiske also wrapped up the case against White House and Treasury officials who alerted the White House when they learned that the Resolution Trust Corp., the federal agency responsible for supervising the liquidation of failed S&Ls;, had asked the Justice Department to investigate Madison Guaranty and Whitewater.

Hubbell, a close friend of the Clintons who recently pleaded guilty to fraudulently charging his law firm for about $400,000 in personal expenses, is currently being grilled by Starr about the Justice Department’s slow response to the RTC referral. He has told friends that he has no knowledge of any wrongdoing.